Author: Jason, NDV Research Watch
On August 18, U.S. Treasury debt surpassed $40 trillion, several months ahead of schedule. This news remained on the business pages for only one day.
We believe it deserves to be read as a decade-level signal. In one paragraph: America’s debt math has reached a point where “depreciation” is the only viable solution (as calculated by official institutions themselves); historically, the winners on this path have always been scarce assets; gold has already been repriced and now holds the position of the world’s largest reserve asset among central banks, while bitcoin—the younger, even scarcer asset under the same logic—has a market cap of only 5% of gold’s. The core inflation hedge for the previous generation was gold; for this generation, bitcoin has joined the shortlist. We validated the tradability of this thesis using 3.5 years of fund performance.
This story will take many years, and we will track every milestone along the way.
First, let's clearly explain the two characters "insurance".
Buying fire insurance doesn’t require predicting which day the fire will happen. You just need to confirm three things: the house is valuable, the risk of fire is real, and the premium is cheap enough relative to the risk.
This article argues exactly these three points—
- Real estate: the purchasing power of your assets. It is priced in U.S. dollars, whose credit is backed by U.S. fiscal policy;
- Source: The mathematics of U.S. debt has reached a stage where it can only be resolved through "devaluation"—this is not an opinion, but a calculation made by official institutions themselves;
- Premium: Among assets hedging this event, gold has been repriced, while bitcoin remains on the floor—the premium is unusually cheap.
One more thing history has repeatedly shown about insurance: when enough people buy a certain insurance, it ceases to be insurance and becomes a core asset. Gold has just completed this transformation, and Bitcoin is walking the same path. Below is a step-by-step breakdown; every number in this article has a source and date—feel free to verify each one.
II. Ignition source: An undisputed arithmetic problem
On August 28, 2026, the number on the U.S. Treasury’s books was $40,104,097,482,666—$40.1 trillion, approximately 123% of U.S. GDP. Over the past year, net increases in U.S. Treasury debt held by the public amounted to $2.5 trillion.
More important than the total amount is the interest. In the just-ended fiscal year 2025, the U.S. government paid $970 billion in net interest, consuming 18.5% of all tax revenue—the highest level on record since 1940. For every $5 in taxes collected, nearly $1 goes toward paying interest on past borrowing.
Moreover, this trend only moves in one direction: the average interest rate on existing U.S. Treasury debt is only 3.45%, while the 10-year yield is near 4.75%—approximately $10 trillion in maturing debt will need to be refinanced over the next 12 months, and each rollover pushes interest costs higher. According to the Congressional Budget Office’s (CBO) own projections, net interest payments will exceed $1 trillion for the first full fiscal year in 2026, reaching $2.1 trillion by 2036.
Here is a compelling comparison to consider: U.S. Treasury bonds have an annual net increase of $2.5 trillion with no cap; Bitcoin has a fixed supply of 21 million coins, halving every four years. One side is infinite supply dictated by politics; the other is absolute scarcity programmed into code—the divergence between these two supply curves is the foundational argument.
Three: Why the Fire Can't Be Extinguished—Cutting the Budget Is Mathematically Impossible
Many people's instinct is: then spend less.
Math doesn’t allow it. According to calculations by the Bipartisan Policy Center (BPC) based on CBO data, starting in 2025, U.S. mandatory spending (Social Security, Medicare, etc.) plus interest already equals total government revenue—every dollar Congress votes on annually, including all defense spending, is borrowed.
The political reality is that both parties are adding up: the large fiscal bill in July 2025 (OBBBA) increases the deficit by another $3.4 trillion over ten years according to CBO scoring; in February 2026, the Supreme Court ruled that sweeping tariffs were an overreach, eliminating the government’s only significant new revenue source and requiring a refund of approximately $166 billion. This year’s deficit is projected at $2.1 trillion—during peacetime and full employment, with the deficit at 6% of GDP.
Over the next decade, this fire has an official schedule, with each stop backed by authoritative sources:
- 2027: Debt ceiling of $41.1 trillion reached again (BPC/CRFB)
- 2028–2030: Debt as a percentage of GDP exceeds the historical record of 106% set during World War II in 1946 (CBO)
- 2029: Global public debt exceeds 100% of global GDP, one year earlier than previously projected (IMF)
- 2032: The U.S. Social Security Trust Fund is projected to be depleted under current law, resulting in an automatic 22% reduction in benefits (2026 Official Trustees Report)
- 2033: Medicare Hospital Fund depleted, hospital payments automatically cut by 11% (same as above)
- 2036: Debt reaches 120% of GDP, net interest reaches $2.1 trillion (CBO)
This is why it’s “worth betting on for the next decade”: you don’t need to guess which year something will happen—official timelines show that each year over the next decade is moving irreversibly forward. The roadmap for rising premiums was printed by the government itself.
Four: The only way to extinguish it has happened once in history.
When debt becomes so high it can’t be repaid, there are theoretically three doors: default, true austerity, or inflationary dilution. Reserve currency nations won’t choose the first; we’ve just shown that the second doesn’t exist. That leaves only the third—known academically as financial repression: keeping interest rates below inflation, so that bondholders and savers quietly lose a bit of purchasing power each year, under the illusion that they’re not losing money nominally.
The last time the U.S. reached this position was in 1946, with debt at 106% of GDP—nearly identical to today. The solution then: the Federal Reserve pinned short-term Treasury rates at 0.375% and capped long-term rates at 2.5%, maintaining this for nine years; during the same period, inflation averaged about 6.5% annually. By 1974, debt as a share of GDP had fallen from 106% to 23%. Academic calculations (Reinhart & Sbrancia) show that the U.S. and U.K. each "erased" the equivalent of 3-4% of GDP annually through negative real interest rates—this money didn’t disappear; it was transferred from savers’ pockets. The U.K. went even further: reducing debt from 270% to 50%.
Economic historian Russell Napier puts it plainly: "Financial repression is slowly taking money from savers and the elderly. 'Slowly' is key—it’s slow enough that the pain isn’t too obvious."
Look at the precedent of 1971: in the decade after Nixon closed the gold window, the price of gold rose from $35 per ounce to $850 in 1980. Every time the monetary system is forced to "reset," scarce assets undergo a repricing. This isn't the first time—it's just this generation's turn.
If you still think these are just history books, look at last week’s news: In August 2026, the U.S. Treasury doubled the size of its long-term bond buybacks to $4 billion per operation, attempting to suppress long-term yields. Legendary trader Stanley Druckenmiller immediately published a signed op-ed in The Wall Street Journal—“This is not liquidity management, this is price management.” Three days later, the Treasury Secretary publicly rebutted him at the G20. Both sides have now entered the arena. Financial repression is not a prediction—it’s breaking news.
Five: The entire process of gold transforming from an insurance policy into a core asset has just been demonstrated right before our eyes.
Before the fire risk increases, who acts first? The world’s most informed and conservative investors—central banks.
Since 2022, central banks worldwide have purchased gold annually at a scale of 850–1,100 tons, roughly double the average of the previous twelve years; in the second quarter of 2026, despite a sharp price correction, central banks bought 289 tons in a single quarter—a record for the second quarter—buying more as prices fell.
The result is a historic shift: according to the European Central Bank's June 2026 report, gold accounts for 27% of global central bank reserve assets, surpassing U.S. Treasuries (22%) for the first time in history as the largest single reserve asset.
Pay attention to the narrative weight of this: Gold went from being an "边缘对冲品" in portfolios to the top asset in official reserve systems in less than five years—this is the complete transformation of insurance into a core asset, performed publicly by central banks worldwide. Gold prices are the footnote: +27% in 2024, +65% in 2025 (the best since 1979), and a historic high of approximately $5,590 in January 2026. The mechanism has also changed—the nearly two-decade-long negative correlation between gold prices and U.S. real interest rates has broken down since 2022, as marginal buyers shifted from Western funds focused on interest rates to sovereign nations that ignore them.
Gold is all about this debt story, and its transformation is already well underway.
Six: Bitcoin — the asset that’s halfway down the same path
From early 2025 to today: Gold is up approximately 80%, while Bitcoin is down about 20%. The same story of currency depreciation, two different price movements, differing by roughly 100 percentage points. The amount of gold one Bitcoin can buy has shrunk from over 30 ounces to about 16 ounces—the lowest level on record for Bitcoin relative to gold.
Some say the market has chosen gold and eliminated Bitcoin. History offers another version: During 2019–2020, gold hit a new high first (in August 2020), and Bitcoin lagged by four to seven months before launching, then catching up with even greater momentum. The reason is straightforward—central banks had established channels to buy gold, while compliant pathways for large capital to purchase Bitcoin were only recently completed.
Three latest signals:
- Attributes are shifting: Bitcoin's 90-day correlation with gold has risen above 0.5 (approaching historical highs), while its correlation with the Nasdaq has dropped from over 60% to 33%—it is transitioning from a "high-volatility tech stock" to a "hedge against sovereign debt fears" (Grayscale, 2026-08);
- Funds are beginning to rotate: Bitcoin rose approximately 25% in August, marking the first August gain since 2021; during the week at the end of August, combined inflows into gold and Bitcoin funds reached $7 billion, setting a weekly record.
- The catalyst directly stems from the debt narrative: the August rally was triggered by the Treasury stepping in to suppress yields and the White House’s statements regarding the strategic reserve—the transmission mechanism is now active.
Seven: Why This Pullback Is Not Like 2018 or 2022
After reaching its peak in October 2025, Bitcoin fell by approximately 54%, and many treated it as another "crypto crash." But the data doesn't support that:
The maximum drawdowns in the first three bear markets were -86%, -84%, and -78%; this one is -54%—each cycle has been shallower. Long-term holders have locked up 83% of the circulating supply (a record high), and the one-year realized volatility has dropped to multi-year lows, approaching levels seen with large tech stocks. The holder structure has changed; the asset is maturing.
More importantly, during this one-and-a-half-year period of price decline, the regulatory framework advanced at its fastest pace: the stablecoin federal legislation (GENIUS Act) has been enacted; the Market Structure Act (CLARITY Act) is set for a Senate vote in mid-September; bank custody has been cleared by regulators; an executive order allowing alternative assets in 401(k) plans has been signed; and a strategic reserve framework has been established. U.S. spot ETFs have collectively seen net inflows of approximately $55 billion, with BlackRock’s IBIT alone holding around 777,000 bitcoins.
Prices are falling, pipelines are being repaired—this is what the most worthwhile phase for research looks like within a cycle.
Eight: How cheap is the premium? A simple math problem, backed by a roster of heavyweight endorsements
The total market capitalization of Bitcoin is approximately $1.58 trillion, which is only 5% of gold's market value.
It doesn’t need to "replace" gold—just capturing a fraction of gold’s market cap would offer multiple times the upside (scenario analysis, not a prediction). And the demand-side gap is glaringly clear:
- BlackRock's official white paper: Allocating 1-2% of a multi-asset portfolio to Bitcoin is within a "reasonable range," and it is described as a unique diversifier;
- Ray Dalio, founder of Bridgewater (July 2025): "If constructing a portfolio for optimal risk-return, about 15% should be allocated to gold or bitcoin." He publicly stated he holds approximately 1%, and reiterated in August 2026: "Sell bonds, buy gold and bitcoin; the window for a debt crisis is three years, plus or minus two years."
- Paul Tudor Jones (April 2026): "Bitcoin is unquestionably the best hedge against inflation—outperforming gold."
- BlackRock CEO Larry Fink warned in his annual letter to investors that if the United States fails to control its debt, the dollar’s status as a reserve currency could be overtaken by digital assets like Bitcoin.
In reality, global institutional allocations are far less than 1%—sovereign funds hold hundreds of millions of dollars, endowments from top universities hold around one hundred million dollars, and most institutions hold close to zero. The gap between the "reasonable range" and "actual holdings" represents structural buying pressure over the coming years: global institutional capital pools total approximately $200 trillion; allocating just 1% would amount to $2 trillion, exceeding today’s total market capitalization of Bitcoin.
There is precedent: the launch of the gold ETF (GLD) in 2004 opened a compliant pathway, and over the next seven years, the price of gold rose by approximately 330%. Bitcoin ETFs launched in January 2024. It’s the same movie—now we’re probably around the 30-minute mark.
Over the past two years, everyone has been talking about AI—we agree it’s a decade-scale productivity revolution. But look at the capitalization: the market value of the seven U.S. tech giants rose by about $6 trillion in two years, and just the five major cloud providers’ AI capital expenditures in 2026 will exceed $800 billion; meanwhile, the equally significant story of currency depreciation is corroborated by theory (an 80-year debt cycle), official data (CBO interest rate projections), and real money (central bank gold purchases), yet the total market cap of flagship assets stands at only $1.58 trillion. The two major trades of this decade are one bet on productivity and one on the monetary system—most portfolios contain only the first. The asymmetry isn’t in opinions—it’s in positioning.
Nine: Bring the opposition to the table
Any worthwhile bet must first pass the test of the opposition:
The debt narrative has already been priced in by gold. Possibly. So we establish our falsification line: if gold continues to make new highs while the Bitcoin-to-gold ratio breaks down again, it indicates the catch-up logic is flawed—exit with discipline.
Bitcoin may continue to decline in the short term. That’s entirely possible. Most sell-side analysts believe the bottom will occur between September and December 2026, with bearish scenarios projecting prices of $40,000–$50,000. No one can precisely time the bottom—what you can do is confirm the cycle position, manage downside risk, and maintain exposure within the window.
When a crisis truly hits, Bitcoin first drops alongside risk assets. This was exactly what happened in 2022. During the initial phase of a liquidity shock, it moves with risk assets; only in the second phase does it get repriced as a scarce asset—this is precisely why insurance requires risk management and structure, not just the slogan "hold through it."
Let’s be clear upfront: a 20% swing up or down in a month is normal for these assets. The value of insurance will be proven over a decade, at the cost of the bumps along the way. What we manage is never just volatility—it’s the path and survival.
Ten, NDV: We have validated this judgment with three and a half years of net value data.
After discussing the worldview, let us introduce ourselves. This story of NDV didn’t start this year—in fact, since 2023, we’ve validated its tradability through two funds and a complete bull-bear market cycle.
NDV (NextGen Digital Venture), established in 2023, is a global macro hedge fund operating under Singapore’s regulatory framework: it only buys U.S.-listed stocks and ETFs (including spot Bitcoin ETFs and their options), does not hold tokens directly, and its fund agreement stipulates a zero-leverage constraint. We view Bitcoin as the anchor asset of this era and express it using traditional financial tools and discipline.
The performance of Fund I (March 2023–February 2025, already liquidated) is public information: established during the market low following the FTX collapse, when Bitcoin was at $30,000, it achieved a cumulative return of approximately +275% over 23 months, turning 1 yuan into 3.75 yuan—outperforming Bitcoin by about 67 percentage points during the same period—and was orderly liquidated near the market peak. Data is disclosed in NDV’s official announcement; the performance series can be queried on Bloomberg Terminal (code LSQNEXI) and is also referenced in related listed company announcements.
Phase II fund launched in May 2025, with Bitcoin as its performance benchmark—we set ourselves the challenge not to simply keep up during rallies, but to outperform Bitcoin over a full market cycle. After three and a half years, the key figures for this journey are as follows (Phase II figures are internal estimates, unaudited; August 2026 is a projection ＊; final figures subject to the manager’s report):
- Through bull and bear markets: Starting with a continuous $1 investment in March 2023, it grew to approximately $4.4 by the end of August 2026*; during the same period, Bitcoin reached about $2.9*, Nasdaq about $2.6*, and gold about $2.4*—outperforming all three benchmarks across bull, bear, and sideways markets;
- Years when Bitcoin declined: Through the end of August 2026, the fund recorded over 40%* in positive returns, while Bitcoin was approximately -10%.
- Drawdown discipline: Over three and a half years, the fund’s net asset value experienced only two drawdowns exceeding double digits (一期 approximately -16%, and the deepest during the二期 transition phase approximately -27%, on a monthly NAV basis), compared to Bitcoin’s maximum drawdown of -54% during the same period—the fund’s maximum drawdown was roughly half that of the benchmark.
Winning comes not from luck, but from discipline and alignment of knowledge with action. Our decision records are publicly available and all timestamped:
- In December 2025, we wrote in our monthly letter that "the opportunity cost of cash had changed," and significantly reduced our positions to shift into defense—after which Bitcoin fell by as much as one-third during the first half of 2026;
- In April 2026, we overemphasized geopolitical risks in the Middle East and missed that rebound—the exact same error was documented in that month’s letter;
- In June 2026, we wrote, "Bitcoin is likely to reach the bottom of this cycle within the next 3-6 months; the task is to hold firepower to complete position building"—June 30 became the lowest point of the year.
We are not always right, but every judgment, right or wrong, is documented. And here’s the most practical truth: the manager is the fund’s largest single investor—if we’re wrong, we’re the first to lose the most.
How to turn a ten-year outlook into specific actions—such as which tools to use, at what price points, and how to exit if wrong—is not suitable for public articles. If you have an allocation plan for digital assets, meet the criteria of a qualified investor, and comply with all applicable investment laws and regulations in your country or region, and wish to learn more about the NDV Fund, please contact us via email. The public version of our daily insights is continuously updated on the podcast "20 Minutes of Non-Consensus" and this channel.